Short a straddle, then the stock gaps
Asked at SIG, Jane Street
You sell an at-the-money straddle at implied volatility with about days to expiry, and you delta-hedge it. For the first days the stock barely moves. Then on day it gaps overnight.
Walk through the P&L, and explain what this says about short-gamma risk and path dependence.
Your answer
This one is open-ended. Work it through, then check your reasoning against the full solution.